New Fannie Mae changes will go into effect beginning November 16th of this year. Specifically, Fannie Mae will be making changes to their Desktop Underwriter (DU), which is the automated underwriting system that lenders use in order to get approval for a loan. Once these changes take place, it will make qualifying for a loan more difficult for consumers.

Some of the changes include stricter debt restrictions for ARMs, they will no longer offer interest-only options, the maximum loan term will be 30 years instead of 40 and down payments must be at least 5 percent of the purchase price instead of the previous 3 percent.

The Federal Housing Administration also made changes to the FHA loan program earlier this year, requiring that buyers pay mortgage insurance for the entire life of the loan, decreasing affordability of that loan option. Many consumers with low down payments turned to the low down payment Fannie Mae loan option as an alternative to the now more costly FHA loan.

Even though buyers will be required to put at least 5 percent down beginning in November, Fannie Mae still offers some advantages over FHA. Advantage include no upfront mortgage insurance costs, lower PMI costs, buyers can entirely use gift money for the down payment and mortgage insurance can be eliminated when the buyer build 20 percent equity in the home.

If you are planning on making a California home purchase and want to determine which low down payment makes sense for you, contact the lending experts at Prospect Financial Group, Inc. today by calling 858-605-0952.